Brexit marathon underway - what will be the implications for construction?

Now that Article 50 has been triggered, what are the implications for the construction industry?

Here are some of the major considerations:

Workforce

The free movement of labour is regarded by people on both sides of the Brexit debate as highly important to the economic health of the nation. This week David Davis, the Secretary of State for Exiting the European Union, said that the status of EU nationals working in Britain would be a government priority. But no promises have been made, and in spite of reassurances that immigration levels will be allowed to rise and fall in line with demand, the shape of future immigration laws is far from clear.

This, in turn, means that their effect on people is also unclear. If future legislation proves complex many workers may choose to remain in mainland Europe, and construction industry employers may likewise decide it’s simply too difficult to hire them. There is, in short, the potential that the industry will have less access to a considerable pool of skilled people.

How is that pool to be replenished? If it’s more difficult to hire people from abroad the industry will need to look closer to home – and in particular at developing the skills of current workers as well as training new recruits. In November last year a report from Arcadisestimated Brexit could cost the UK 215,000 EU workers. The research group called for an urgent focus on retraining and modernisation. The apprenticeship levy coming into force this spring is designed to encourage moves in this direction but, as we will see in a forthcoming post, overseeing skills training and its financing looks far from straightforward.

Working conditions

It’s not just about the availability of people but the rules that apply to employing them. The UK is guided by several EU employment regulations and the extent to which the spirit and letter of these regulations will be replicated post-Brexit is a moot point. Areas that will need reconsideration may well include working hours, holiday entitlement, sick pay, dismissal procedures and health and safety. The construction industry will want to abide by UK legislation as it evolves but will also be mindful of the disparate demands of its need to be competitive on the one hand and its natural duty of care to its workforce on the other.

The movement of goods is as important as the movement of people, and membership of the EU has simplified imports into the UK of materials from the rest of the continent.

Unpicking the regulations that apply to individual goods and commodities looks set to be one of the most complex parts of the Brexit process. It is one of the areas most often cited when Article 50 deadlines are discussed: we simply won’t meet the two-year deadline, critics say.

In the meantime the industry won’t be content merely to hope for a positive outcome. Collectively or individually, construction companies will want to explore other sources outside the EU – but of course, those sources may themselves be subject to government-level trade deals that haven’t yet been done. Indeed, no EU member state can sign a treaty purely on its own behalf with a non-EU state, which means such deals are effectively on hold for the next two years.

That said, there is nothing to stop any country having discussions. In a meeting last October Dr Liam Fox, Secretary of State for International Trade, said Britain could do a lot of groundwork this way so that it could be ready to sign a treaty similar to those non-EU countries already have with the EU at a minute past midnight on the day of the UK’s exit.

It’s also worth noting that different materials from different sources may also have a bearing on the application of technical, environmental and other standards and hence on contracts as well as on regulatory compliance.

Foreign investment

Brexit will have an impact on foreign investment from both public and private sector sources.

The principal public sector foreign investor is of course the EU itself. For example, the European Regional Development Fund (ERDF) is one of the five principal funds forming the European Structural and Investment Fund (SSIF). The ERDF is partly designed to reduce economic, environmental and social problems in urban areas, with a special focus on sustainable urban development. The UK Government and devolved administrations are going to need to decide if and how to replace these investments.

Private sector investment in construction is a bellwether: its status is a good indicator not just of the health of the economy as a whole but more particularly of the optimism of others in Britain’s post-Brexit future. Earlier this week the Middle Eastern state of Qatar committed £5bn of new money to invest in UK property as well as in transport and digital technology. Is this a sign of confidence and hence of more good things to come? It’s probably too early to say.

Summing up

In fact, if there’s a theme running through this piece it’s probably that last point. On the implications of Brexit for the availability and working conditions of people in the construction industry; for its effect on the availability and cost of materials; and for the effect it will have on public and private sector investment – on all these points the jury’s still ou

Article 50 was the starting gun – and the event that has just begun is not a sprint. It’s a marathon, and no one yet knows what the finishing line will look like.